Missing the boat: Canadian CEOs more reticent on R&D and innovation than CEOs globally

Reliance on resources, conservativism and lack of urgency could be a few of the reasons why

TORONTO— According to a global survey of CEOs, only 63% of Canadian CEOs expect to make changes over the next 12 months with respect to their Research and Development (R&D) and innovation capacity, compared to 72% of their global counterparts. PwC’s report “Growth through adaptation” found that Canadian leaders were lower than the global average in terms of their plans for investment across all forms of innovation— from new products and services to finding cost reductions in existing practices.

“There appears to be a general perception that because of our focus and reliance on the natural resources sector, Canada has lagged behind other countries in terms of its investment and support to R&D. We are often seen as a “fast follower” to other countries because that has traditionally been ‘okay’ in our market,” says Tracey Riley, PwC’s National Consulting & Deals Leader.

In the BRIC countries, R&D and innovation is more of a driving force for future changes. Eighty-two percent of BRIC CEOs anticipate changes in R&D and innovation capacity in the next year. Proximity may have something to do with Canada’s level of investment, according to Riley, “Canada is more distant from most of the emerging markets and low-cost markets that often contribute to, or are the target markets for, innovation.”

Other explanations as to why Canada is “missing the boat” on innovation range from its business culture to its geography and political environment. In general, Canada is seen as more conservative in business, more isolated and contained geographically and not having undergone the same turmoil and volatility that has been felt in other countries which are under pressure to develop. The scale and aggression of competitors is also ostensibly less intense in Canada.

Dr. David Jacobson, former Director of Emerging Technologies at PwC, believes what’s missing is the urgency to change. “There is no reason whatsoever why big organizations can’t be innovative. But to do so, they must not act like big organizations with the ‘baggage of bureaucracy’ and excessive top-down control.” He suggests some ways CEOs can do this, including:

Reduce the distance between themselves and good ideas — become hands-on and really participate. Most leaders can’t get this right.

Help enable innovation by providing a framework and encouragement; providing the right atmosphere and incentives — and finally rewarding the successes.

Resist the temptation to establish a data warehouse of innovative ideas. This and related bureaucratic approaches will dissuade creative people from participating.

So what are Canadian CEOs focused on? “Our survey told us that the Canadian leaders are placing their focus on sustainable long-term change and cost reduction. Two-thirds of them expect to change their business strategy over the next twelve months driven by factors like customer demand, the economy, competition and talent,” says Riley.

Survey methodology
For PwC's 15th Annual Global CEO Survey, 1,258 interviews were conducted in 60 countries in the last quarter of 2011. In Canada, 130 CEOs were surveyed. 291 interviews were conducted in Western Europe, 440 in Asia Pacific, 150 in Latin America, 236 in North America, 88 in Central and Eastern Europe, and 53 in the Middle East & Africa. The full survey report with supporting graphics can be downloaded at www.pwc.com/ca/ceosurvey. Follow the discussion on Twitter with #ceo_survey. Copies are also available from the media contacts.

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